FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
For Quarter Ended June 30, 1995 Commission File number 2-71058
DAWSON GEOPHYSICAL COMPANY
(Exact name of Registrant as specified in its Charter)
TEXAS 75-0970548
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
208 S. Marienfeld, Midland, Texas 79701
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) 915/682-7356
NONE
(Former Name, Former Address & Former Fiscal Year if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS Outstanding at June 30, 1995
Common Stock, $.33 1/3 par value 4,145,300 shares
DAWSON GEOPHYSICAL COMPANY
INDEX
Page No.
Part I.Financial Information:
Statements of Operations --
Three Months and Nine Months
ended June 30, 1995 and 1994 3
Balance Sheets --
June 30, 1995 and September 30,
1994 4
Statements of Cash Flows --
Nine Months Ended June 30, 1995
and 1994 5
Notes to Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7
Part II.Other Information
PART I. FINANCIAL INFORMATION
<TABLE>
DAWSON GEOPHYSICAL COMPANY
STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
June 30 June 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
<C>
Operating revenues $7,461,000 $6,112,000 $21,944,000 $16,807,000
Operating costs:
Operating expenses 5,311,000 3,872,000 15,495,000 11,061,000
General and administrative 204,000 199,000 782,000 694,000
Depreciation 1,073,000 818,000 3,016,000 2,157,000
6,588,000 4,889,000 19,293,000 13,912,000
Income from operations 873,000 1,223,000 2,651,000 2,895,000
Other income (expense):
Interest income 89,000 44,000 322,000 149,000
Interest expense (5,000) (116,000) (170,000) (259,000)
Gain on disposal of assets 55,000 - 77,000 35,000
Other income 136,000 2,000 155,000 20,000
Non-cash donation - - - (44,000)
Income before income tax 1,148,000 1,153,000 3,035,000 2,796,000
Income tax expense:
Current (238,000) (401,000) (931,000) (956,000)
Deferred (197,000) - (197,000) (43,000)
(435,000) (401,000) (1,128,000) (999,000)
Net income $ 713,000 $ 752,000 $ 1,907,000 $ 1,797,000
Net income per common share $.17 $.25 $.49 $.59
Weighted average equivalent shares
outstanding 4,200,465 3,046,686 3,923,636 3,043,924
See accompanying notes to the financial statements.
</TABLE>
<TABLE>
DAWSON GEOPHYSICAL COMPANY
BALANCE SHEETS
<CAPTION>
June 30, 1995 September 30, 1994
(UNAUDITED)
<S>
ASSETS <C> <C>
Current assets:
Cash and cash equivalents $ 1,280,000 $ 151,000
Marketable securities 4,514,000 3,102,000
Accounts receivable 5,628,000 4,304,000
Prepaid expenses 223,000 199,000
Total current assets 11,645,000 7,756,000
Marketable securities - 2,250,000
Property, plant and equipment 36,860,000 28,851,000
Less accumulated depreciation (16,683,000) (13,915,000)
Net property, plant and equipment 20,177,000 14,936,000
$31,822,000 $24,942,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term and current maturities
of long-term debt $ - $ 4,125,000
Accounts payable 634,000 134,000
Accrued liabilities:
Salaries and wages 125,000 478,000
Payroll and other taxes 140,000 65,000
Other 117,000 44,000
Federal and state income taxes payable - 121,000
Total current liabilities 1,016,000 4,967,000
Long-term debt, less current maturities - 2,250,000
Deferred income taxes 236,000 39,000
Stockholders' equity:
Preferred stock - par value $1.00 per share;
5,000,000 shares authorized, none
outstanding - -
Common stock - par value $.33 1/3 per share;
10,000,000 shares authorized, 4,145,300
and 2,996,050 share issued and outstanding 1,382,000 1,001,000
Additional paid-in capital 16,958,000 6,437,000
Net unrealized loss on marketable securities (16,000) (91,000)
Retained earnings 12,246,000 10,339,000
Total stockholders' equity 30,570,000 17,686,000
$31,822,000 $24,942,000
See accompanying notes to the financial statements.
</TABLE>
DAWSON GEOPHYSICAL COMPANY
<TABLE>
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Nine Months Ended
June 30
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $1,907,000 $1,797,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 3,016,000 2,157,000
Gain on disposal of assets (77,000) (35,000)
Non-cash donation - 44,000
Non-cash interest income (189,000) (32,000)
Deferred income taxes 197,000 43,000
Change in current assets and liabilities:
Decrease (increase) in accounts receivable (1,324,000) 113,000
Increase in prepaid expenses (24,000) (38,000)
Increase in accounts payable 500,000 9,000
Increase (decrease) in accrued liabilities (205,000) 305,000
Increase (decrease) in federal and state income
taxes payable (121,000) 913,000
Net cash provided by operating activities 3,680,000 5,276,000
Cash flows from investing activities:
Proceeds from disposal of assets 290,000 35,000
Capital expenditures (8,470,000) (5,806,000)
Proceeds from sale and maturity of
marketable securities 7,037,000 2,000,000
Investment in marketable securities (5,935,000) (1,913,000)
Net cash used in investing activities (7,078,000) (5,684,000)
Cash flows from financing activities:
Principal payments on debt (7,875,000) (11,650,000)
Proceeds from debt 1,500,000 11,992,000
Proceeds from public offering 10,785,000 -
Proceeds from exercise of stock options 117,000 -
Net cash provided by financing activities 4,527,000 342,000
Net increase (decrease) in cash and cash equivalents 1,129,000 (66,000)
Cash and cash equivalents at beginning of period 151,000 95,000
Cash and cash equivalents at end of period $1,280,000 $ 29,000
See accompanying notes to the financial statements.
</TABLE>
DAWSON GEOPHYSICAL COMPANY
NOTES TO FINANCIAL STATEMENTS
1. OPINION OF MANAGEMENT
Although the information furnished is unaudited, in the opinion of
management of the Registrant, the accompanying financial statements reflect
all adjustments (consisting only of normal recurring accruals) necessary for
a fair presentation of the financial condition and results of operations for
the periods presented. The results of operations for the three months and
the nine months ended June 30, 1995, are not necessarily indicative of the
results to be expected for the fiscal year.
2. NOTES PAYABLE
As of December 14, 1993, the Company entered into a $4,000,000 term note
with a bank. The term note was to mature December 31, 1997 (at April 7,
1995, the principal balance was $2,750,000). The note was secured by
eligible accounts receivable and pledged marketable securities. The
interest rate on the note was the bank's prime rate (9% at April 7, 1995).
The term note required monthly principal and interest payments. The term
note was subject to a loan agreement that contained various restrictive
covenants and compliance requirements which included limitations on the
incurrence of additional indebtedness.
The Company paid off and terminated the term note on April 7, 1995 and
currently has no debt facility.
3. PUBLIC OFFERING
On November 21, 1994, the Company completed a public offering of 1,000,000
shares and on December 21, 1994, the underwriters, Principal Financial
Securities, Inc., exercised an option for an additional 114,000 shares. The
proceeds of the offering were approximately $11,000,000 after deducting
costs payable by the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Since 1989, oil and gas industry demand for 3-D seismic services has
increased significantly. To meet this demand, the Company converted its
operations from the traditional 2-D seismic method to the more technologi-
cally advanced 3-D seismic method. Because of increased demand and the
related expansion of its 3-D seismic capabilities, the Company's results of
operations have shown significant improvement over the past few years.
As a result of the Company's public offering completed during the first
quarter of fiscal year 1995, the Company has issued an additional 1,114,000
shares for net proceeds of $10,785,000. In February 1995, the Company
placed into service a new 3-D recording system to increase its capabilities
to five data acquisition crews utilizing $7,057,000 of the offering pro-
ceeds. In April 1995, the Company extinguished all debt for a total of
$2,750,000. In June 1995, the Company received final litigation proceeds of
$131,500 in addition to the 1993 proceeds resulting from the suit filed
against First RepublicBank in 1988.
In reviewing the Company's financial statements, it should be noted that
fluctuations in the Company's results of operations can occur due to weather
and other factors.
Results of Operations
The Company's operating revenues for the first nine months of 1995 totaled
$21,944,000 versus $16,807,000 for the same period of fiscal 1994, an
increase of 30.5%. For the three months ended June 30, 1995, operating
revenues increased $1,349,000 or 22.1%. The increase for the nine months is
attributable primarily to the increasing industry demand for 3-D data
acquisition services and the benefit of the 3-D seismic crews placed into
service in February 1994 and February 1995. The increase for the quarter
ended June 30, 1995, as compared to the same quarter of fiscal 1994, is less
than expected due to the negative impact of unfavorable weather. Minimal
revenues were generated through the acquisition and processing of 2-D
seismic data.
Operating expenses for the nine months ended June 30, 1995 totaled
$15,495,000, an increase of $4,434,000, or 40.1%, over the same period of
fiscal 1994. For the quarter ended June 30, 1995, operating expenses
increased $1,439,000, or 37.1%. Operating expenses increased primarily as a
result of the additional expenses of increased personnel and other expenses
of placing crews into service in February 1994 and February 1995.
General and administrative expenses for the nine months ended June 30, 1995
totaled $782,000, an increase of $88,000 over the same period of fiscal
1994. For the three months ended June 30, 1995, general and administrative
expenses totaled $204,000 versus $199,000 for the same period of the prior
year. General and administrative expenses totaled 3.6% of operating revenue
for the nine months ended June 30, 1995 versus 4.1% of operating revenues
for the same period of the prior year. This decline as a percentage of
operating revenue is a result of economies of scale and improved operating
efficiency.
Depreciation for the nine months ended June 30, 1995 totaled $3,016,000, an
increase of $859,000 from the same period of fiscal 1994. For the quarter
ended June 30, 1995, depreciation increased $255,000 to $1,073,000.
Depreciation increased as a result of the capital expansion discussed below
in "Liquidity and Capital Resources."
Total operating costs increased $5,381,000 to $19,293,000 for the nine
months and $1,699,000 to $6,588,000 for the quarter ended June 30, 1995 due
to the operating expenses of starting up the new crew and the associated
increase in depreciation. These increases in costs combined with a reduc-
tion of revenues due to adverse weather in the quarter ended June 30, 1995
resulted in the decrease in income from operations as compared to the prior
year.
Interest income increased $173,000 for the nine months and $45,000 for the
quarter ended June 30, 1995 as compared to the comparable periods of the
prior year primarily due to the interest earned from the investment of the
offering proceeds pending use for capital expenditures and retirement of
debt.
The Company's effective tax rate for the nine months ended June 30, 1995 was
37.2% as compared to 35.7% for the nine month period ended June 30, 1994.
These rates reflect the effects of federal and state income taxes for the
periods reported.
Liquidity and Capital Resources
Cash Flows
Net cash provided by operating activities decreased to $3,680,000, which
includes an increase in net income and depreciation, represents a decrease
from the prior year primarily as the result of the combined increases and
decreases relating to working capital items. The increase in accounts
receivable reflects the effects of large 3-D projects from a few clients
versus several small projects from many clients. The Company believes
collectibility of receivables at June 30, 1995 is reasonably assured. The
decrease in 1995 of federal and state income taxes payable in relation to
the increase in 1994 signifies that estimated payments have been made in
1995 reflective of current tax liability.
Net cash used in investing activities increased to $7,078,000 for the nine
months ended June 30, 1995 from $5,684,000 for the same period of fiscal
1994. This change was primarily due to capital expenditures. For the nine
months ended June 30, 1995, capital expenditures of $8,470,000 have enabled
the Company to place a new crew in the field and the addition of peripheral
equipment for all crews continues to expand the capacity of the Company.
Net cash provided by financing activities increased primarily due to the
proceeds of the public offering used to finance the addition of equipment
for the fifth 3-D seismic crew and the extinguishment of debt. The Company
paid off the term note on April 7, 1995 and currently has no debt agreement.
Capital Expenditures
Capital expenditures of $8,470,000 for the nine months ended June 30,
1995 represent the addition of a fifth 3-D data acquisition crew placed into
service during the second quarter of fiscal 1995, enhancement and expansion
of the equipment of the existing crews and data processing facilities, and a
14-acre property that consolidates field support services. The facility
contains three buildings totaling 53,000 square feet of floor space consist-
ing of service bays, offices, warehouses and laboratories. The facility was
exchanged for a one-acre tract containing an 11,000 square foot shop and
approximately $500,000.
Capital Resources
The Company believes that cash flow from operations are adequate to meet
its current operational needs. Future capital expenditures will depend on
anticipated demand, technological developments, and the Company's evaluation
of financing alternatives.
Accounting Standard on Impairment of Long-Lived Assets
In March 1995, the Financial Accounting Standards Board issued State-
ment of Financial Accounting Standards No. 121 - Accounting for Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of ("FAS 121")
regarding the impairment of long-lived assets, identifiable intangibles and
goodwill related to those assets. FAS 121 is effective for financial
statements for fiscal years beginning after December 15, 1995, although
earlier adoption is encouraged. The Company is currently not able to
estimate the effect that FAS 121 will have on the Company's results of
operations for the period in which it is adopted.
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its
behalf by the undersigned, thereunto duly
authorized.
DAWSON GEOPHYSICAL COMPANY
(REGISTRANT)
By: /s/ L. Decker Dawson
L. Decker Dawson
President
/s/ Christina W. Hagan
Christina W. Hagan
Treasurer, Controller
DATE: July 28, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,280,000
<SECURITIES> 4,514,000
<RECEIVABLES> 5,268,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,645,000
<PP&E> 36,860,000
<DEPRECIATION> (16,683,000)
<TOTAL-ASSETS> 31,822,000
<CURRENT-LIABILITIES> 1,016,000
<BONDS> 0
<COMMON> 1,382,000
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 31,822,000
<SALES> 21,944,000
<TOTAL-REVENUES> 21,944,000
<CGS> 19,293,000
<TOTAL-COSTS> 19,293,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (170,000)
<INCOME-PRETAX> 3,035,000
<INCOME-TAX> (1,128,000)
<INCOME-CONTINUING> 1,907,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,907,000
<EPS-PRIMARY> .49
<EPS-DILUTED> 0
</TABLE>
